Q4 2023 Marriott Vacations Worldwide Corp Earnings Call
Operator: www.marriottvacationsworldwide.com Greetings and welcome to the Marriott Vacations Worldwide fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
Yeah.
Yeah.
Speaker Change: Greetings and welcome to the Marriott vacations worldwide fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Neal Goldner, Vice President of Best Relations for Marriott Vacations Worldwide. Thank you.
Speaker Change: As a reminder, this conference is being recorded.
Speaker Change: I'd now like to turn the conference over to your host Mr. Neal Goldner, Vice President Investor Relations for Marriott vacations worldwide. Thank you you may begin.
Neal H. Goldner: Thank you and welcome to the Marriott Vacations Worldwide fourth quarter 2023 earnings call. I'm joined today by John Geller, President and Chief Executive Officer, and Jason Marino, our Executive Vice President and Chief Financial Officer. I need to remind everyone that many of our comments today are not historical facts and are considered faux and hooking statements under federal securities laws. Statements are subject to numerous risks and uncertainties, as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the press release that we issued last night, as well as our comments on this call, are effective only when made and will not be updated as actual events unfold. Throughout the call, we will make references to non-GAAP financial information. A reconciliation of non-GAAP financial measures and the schedules is attached to our press release, as well as on the investor relations page of our website.
Neal H. Goldner: Thank you and welcome to the Marriott vacations worldwide fourth quarter 2023 earnings call.
Neal H. Goldner: I'm joined today by John Geller, President and Chief Executive Officer, and Jason Marino, Our executive Vice President and Chief Financial Officer.
Neal H. Goldner: I need to remind everyone that many of our comments today are not historical facts and are considered forward looking statements under federal Securities laws.
Neal H. Goldner: These statements are subject to numerous risks and uncertainties as described in our SEC filings, which could cause future results to differ materially from those expressed in or implied by our comments.
Neal H. Goldner: Forward looking statements in the press release that we issued last night as well as our comments on this call are effective only onemain and will not be updated as actual events unfold.
Neal H. Goldner: Throughout the call we will make references to non-GAAP financial information you can find a reconciliation of non-GAAP financial measures in the schedules attached to our press release.
Neal H. Goldner: As well as the Investor Relations page of our website.
Neal H. Goldner: Yeah.
Neal H. Goldner: Before I turn up.
Neal H. Goldner: Before I turn it over to John... As you saw in our earnings release last night, with four vacation ownership resorts in West Maui, the wildfires had a negative impact on our results in the third and fourth quarters despite having no physical damage to our properties. We added a table to our earnings release last night to illustrate the impact of the wildfires on our business. In addition, during last year's third quarter, with the launch of Abound by Marriott Vacations, we aligned the contract terms for vacation ownership sales across our Marriott, Weston, and Sheridan brands. We also aligned and combined their accounting methodologies for the reserve.
Neal H. Goldner: Before I turn the call over to John.
John E. Geller: As you saw in our earnings release last night with for vacation ownership resorts and West now either the wildfires had a negative impact on our results and necessary.
John E. Geller: Despite having no physical damage to our properties.
John E. Geller: We added a table to our earnings release last night to illustrate the impact of the wildfires on our business.
John E. Geller: In addition, during last year's third quarter with the launch of a bound by Marriott vacations as well Verifications, we aligned the contract terms for a vacation ownership sales across our Marriott Westin and Sheraton brands. We also aligned and combine your accounting methodologies for the reserve.
Neal H. Goldner: Ownership Notes received well before these changes, which were referred to as the alignment, resulted in a non-recurring benefit of $7 million to last year's fourth quarter adjusted EBITDA. Schedules we provided last night illustrate what our results would have been for a year without this benefit. With that, it's now my pleasure to turn the call over to our CEO, John Geller.
John E. Geller: I shouldn't notes receivables for these factors.
John E. Geller: These changes, which we refer to as the alignment resulted in a nonrecurring benefit of $7 million last years fourth quarter adjusted EBITDA.
John E. Geller: The schedule that we provided last night illustrate what our results would have been.
Roberts: Yeah without this benefit with that it's now my pleasure to turn the call Roberts, our CEO John Geller.
John E. Geller: Thanks, Neal, and good morning, everyone, and thank you for joining our fourth quarter earnings call. As you saw in our press release last night, we ended the year on a positive note with contract sales increasing 4% year over year, adjusting for the estimated impact of Maui. We're also very encouraged with how fast travelers have returned to Maui, with occupancy during the month of December approaching the prior year. However, housing in Maui continues to be a challenge for residents, including many of our associates.
John E. Geller: Thanks, Neil and good morning, everyone and thank you for joining our fourth quarter earnings call.
John E. Geller: As you saw in our press release last night, we ended the year on a positive note with contract sales, increasing 4% year over year adjusting for the estimated impact of Maui.
John E. Geller: We're also very encouraged with how fast travelers have return to Maui with occupancy during the month of December approaching the prior year.
John E. Geller: Housing in Maui continues to be a challenge for residents, including many of our associates.
John E. Geller: Fortunately, our operations team was close to fully staffed as we entered the new year, though only approximately 75% of our sales organization was back to pre-fire levels. Throughout last year, we worked with owners to educate them about the benefits of the Abound by Marriott Vacations program, while at the same time, our sales executives gained experience selling under Abound. Today, more legacy Sheraton and Weston owners are using the Abound program, enabling them to experience its many benefits. BPG, excluding the estimated impact of the Maui fires, was in line with the prior year.
John E. Geller: Fortunately our operations team was close to fully staffed as we entered the new year.
John E. Geller: They'll only approximately 75% of our sales organization was back to pre fire levels throughout last year, we worked with owners to educate them about the benefits of the of bound by Marriott vacations programs. While at the same time, our sales executives gained experience selling under about.
John E. Geller: Today more legacy Sheraton and Westin owners are using the abound program, enabling them to experience its many benefits.
John E. Geller: P. P G. Excluding the estimated impact of the Maui fires was in line with the prior year, a meaningful improvement compared to where we were just a few quarters ago and at this point the impact of the of bound transition is behind us.
John E. Geller: This is meaningful improvement compared to where we were just a few quarters ago, and at this point, the impact of the abound transition is behind us. 2023 was also an exciting year for our Hyatt business. We brought our 22 Hyatt resorts together under the Hyatt Vacation Club brand, unified our customer touchpoints, and introduced the Beyond Program, which provides owners with more vacation options.
John E. Geller: 2023 was also an exciting year for our Hyatt business, we brought our 'twenty two Hyatt resorts together under the Hyatt vacation club brand.
John E. Geller: Unified our customer touch points and introduce the beyond program, which provides owners more vacation options. We also expanded our highly successful preview booking engine and we will continue to replace inefficient off premise marketing channels with more efficient branded channels. This will enable us to.
John E. Geller: We also expanded our highly successful preview booking engine and will continue to replace inefficient off-premise marketing channels with more efficient branded channels. This will enable us to grow towards an increased VPG in our high vacation ownership business this year, allowing us to better leverage our marketing and sales spending. First-time buyers represented roughly half of our tours last year and nearly a third of our contract sales, as we continue to focus on driving new owner growth. We also ended the year with more than 250,000 packages in our pipeline, which is an all-important driver of future sales. We saw strong growth in our international business last year, with contract sales growing more than 50%, and we expect strong growth in Asia-Pacific again this year as the market continues to recover. On the development front, we announced two new domestic Western Vacation Club projects, Charleston and Savannah, each of which will bring a new sales center when they open in a few years. We'll also be opening our first Marriott Vacation Club Resort in Waikiki during the second half of this year, which comes with a new sales center as well.
John E. Geller: ROE towards an increased V. P. G in our Hyatt vacation ownership business this year, allowing us to better leverage our marketing and sales spending.
John E. Geller: First time buyers represented roughly half of our tours last year and nearly a third of our contract sales as we continue to focus on driving new owner growth. We also ended the year with more than 250000 packages in our pipeline, which is an all important driver of future sales we saw.
John E. Geller: Strong growth in our international business last year with contract sales growing more than 50% and we expect strong growth in Asia Pacific again, this year as the market continues to recover on.
John E. Geller: On the development front, we announced two new domestic western vacation club projects, Charleston, and Savannah, each of which will bring a new sales center when they open in a few years.
John E. Geller: Well also be opening our first Marriott vacation club resort in Waikiki during the second half of this year, which comes with the new sales centers as well.
John E. Geller: On the international front, I'm happy to announce that we recently signed an agreement for a 58-unit expansion at one of our existing Marriott Vacation Clubs in Bali, bringing our presence in that destination to nearly 200 units. And our team is actively working on other new development opportunities to grow our resort portfolio. In our exchange and third-party management segment, Interval ended the year with approximately 1.6 million active members, in line with the prior year, while average revenue per member increased year over year for the third quarter in a row. On the inventory front, we've been working closely with our developer partners to stimulate supply earlier in the year, which we hope will drive higher inventory utilization and exchange transactions. Despite the growth in leisure travel over the past few years, 92% of Americans recently surveyed said they plan to travel as much or more this year than they did last year, and demand for international travel continues to be strong.
John E. Geller: On the international front I'm happy to announce that we recently signed an agreement for a 58 unit expansion at one of our existing Marriott vacation club symbolic bringing our presence in that destination to nearly 200 units.
John E. Geller: And our team is actively working with other new developed on other new development opportunities to grow our resort portfolio.
John E. Geller: In our exchange <unk> third party management segment interval ended the year with approximately 1.6 million active members in line with the prior year, while average revenue per member increased year over year for the third quarter in a row.
On the inventory front, we've been working closely with our developer partners to stimulate supply earlier in the year, which we hope will drive higher inventory utilization and exchange transactions.
John E. Geller: Despite the growth in leisure travel over the past few years, 92% of Americans recently survey said they plan to travel as much or more this year as they did last year and demand for international travel continues to be strong.
John E. Geller: While demand for domestic travel has normalized, it does appear that travel will benefit from a more lasting shift in spending with consumers prioritizing experiences. As a company whose sole focus is providing memorable vacations for our owners and guests, that puts us in a great position to grow. At the same time, GDP is growing, consumer confidence remains positive, wealth indicators such as the stock market and home values remain robust, and inflation is normalizing, all of which is good for us. Looking forward, we've got a great business with the exclusive rights to use the Marriott, Sheraton, Weston, and Hyatt brands in our vacation ownership business, with products that resonate with customers and opportunities to continue to evolve our core offerings to meet the needs of today's consumers.
John E. Geller: While demand for domestic travel has normalized it does appear that travel will benefit from a more lasting shift in spending with consumers prioritizing experiences.
As a company, whose sole focus is providing memorable vacation for our owners and guests that puts us in a great position to grow at the same time GDP growth consumer confidence remains positive wealth indicators, such as the stock market and home values remain robust and inflation is normalizing all of which is.
John E. Geller: Good for us.
John E. Geller: Looking forward, we've got a great business with the exclusive rights to use the Marriott Sheraton Westin and Hyatt brands in our vacation ownership business with products that resonate with customers and opportunities to continue to evolve our core offerings to meet the needs of today's consumer.
John E. Geller: We also made significant changes in our business last year that are the right strategic decisions to help position us for growth. We took actions to realign our organization to best deliver long-term results, including hiring a new CIO to drive our IT transformation efforts and revamping our organizational structure to create efficiencies. We also welcomed our first global head of data analytics to help us find new ways to unlock the power of data, while also providing more self-service options for our owners. Our Marriott Vacation Club brand will celebrate its 40th anniversary this year and continues its bold vision to change the way people vacation.
John E. Geller: We also made significant changes in our business last year that are the right strategic decisions to help position us for growth. We took actions to realign our organization to best deliver long term results, including hiring a new CIO to drive our I T transformation efforts, while revamping our organizational structure to Cree.
John E. Geller: Fishing season, we also welcomed our first global head of data analytics to help us find new ways to unlock the power of data, while also providing more self service options for our owners.
John E. Geller: Our Marriott vacation club brand will celebrate its 40th anniversary this year and continues the bold vision to change the way people vacation.
John E. Geller: I've also had the opportunity to meet many of our associates around the world in my first year as CEO, and the energy and passion our teams bring to delivering consistently exceptional vacation experiences is apparent in each of them. As we enter 2024, we're also watching our summer bookings closely, given the change in travel patterns we saw last year. Right now, our key on the books for the summer months in North America and international are up a few points, which is encouraging, but it's still early days. With that, I'll turn the call over to Jason to discuss our results. Thanks, Shaun.
John E. Geller: I've also had the opportunity to meet many of our associates around the world in my first year as CEO and the energy and passion, our teams bring to delivering consistently exceptional vacation experiences as a parent and each of them.
John E. Geller: As we enter 2024, we're also watching our summer bookings closely given the change in travel patterns. We saw last year right now our keys on the books for the summer months in North America and international are up a few points, which is encouraging but it's still early days with that I'll turn the call over to Jason.
Jason Marino: To discuss our results.
Jason Marino: Thanks, Sean.
Jason Marino: Today, I'm going to review our fourth-quarter results, the strength of our balance sheet and liquidity, and our 2024 outlook. Starting with our vacation ownership segment, contract sales in the fourth quarter declined 2% year-over-year, but they increased 4% excluding Maui.
Jason Marino: Today I'm going to review, our fourth quarter results, the strength of our balance sheet and liquidity and our 'twenty 'twenty four outlook.
Jason Marino: Starting with our vacation ownership segment.
Jason Marino: Contract sales in the fourth quarter declined 2% year over year, but increased 4% excluding Maui.
Jason Marino: BPG was down 2% year-over-year but was unchanged, adjusting for the estimated Maui impact, illustrating the substantial improvement we've made since the second quarter. Adjusted development margin increased 160 basis points year-over-year to 33 percent, driven by lower product costs. As we've mentioned in the past, one of the benefits of the alignment is that we do not expect to have the kind of quarterly-to-quarter reportability impacts that we used to have. So while we did report a $20 million net reportability benefit in our development profit in last year's fourth quarter, it was only a $1 million adjustment this quarter. As expected, sales reserve as a percent of contract sales increased due to the higher financing propensity and slightly higher reserve on originations as a result of the default trends we've been experiencing over the last several quarters.
Jason Marino: <unk> was down 2% year over year, but was unchanged adjusting for the estimated Maui impact illustrating the substantial improvement we've made since the second quarter.
Jason Marino: Adjusted development margin increased 160 basis points year over year to 33% driven by lower product cost as we've mentioned in the past one of the benefits of the alignment is that we do not expect to have the kind of quarter to quarter of affordability impacts that we used to have so while we did report a $20 million net reported ability benefit in our development.
Jason Marino: <unk> in last year's fourth corner, it was only a $1 million adjustment this quarter.
Jason Marino: As expected sales reserve as a percent of contract sales increased due to the higher financing propensity and slightly higher reserve on originations as a result of the default trends we've been experiencing over the last several quarters.
Jason Marino: Delinquency and defaults were each up around 60 basis points on a year-over-year basis, largely consistent with what we saw in the third quarter, and we believe our reserve is currently at appropriate levels for viewing the rest of our vacation ownership segment. Rental profit was largely unchanged compared to the prior year, with more keys rented being partially offset by increased unsold inventory expenses. Financing profit was largely unchanged, with higher interest income offset by higher interest expense, and Resort Management Profit Increased Driven by Higher Management Fees.
Jason Marino: Delinquency and defaults were each up around 60 basis points on a year over year basis, largely consistent with what we saw in the third quarter and we believe our reserve is currently at appropriate levels.
Jason Marino: Reviewing the rest of our vacation ownership segment.
Jason Marino: Rental profit was largely unchanged compared to the prior year with more keys rented being partially offset by increased unsold inventory expense <unk>.
Jason Marino: Financing profit was largely unchanged with higher interest income offset by higher interest expense.
Jason Marino: And resort management profit increased driven by higher management fees.
Jason Marino: Adjusting for the Maui impact and last year's alignment benefit, adjusted EBITDA on our vacation ownership segment would have increased 3% year over year. Moving to our exchange and third-party management business, higher revenue per member was offset by fewer member exchanges and lower getaway volume. As a result, Adjusted EBITDA was $31 million in the quarter, while Adjusted EBITDA Margin was again strong at 52%. However, corporate G&A costs increased $22 million year-over-year due to higher wages due to inflation.
Jason Marino: Adjusting for the Maui impact in last year's alignment benefit adjusted EBITDA in our vacation ownership segment would have increased 3% year over year.
Jason Marino: Moving to our exchange <unk> third party management business higher revenue per member was offset by few remember exchanges and lower getaway volume.
Jason Marino: As a result, adjusted EBITDA was $31 million in the quarter, while adjusted EBITDA margin was again strong at 52%.
Jason Marino: Corporate G&A cost increased $22 million year over year due to higher wages due to inflation.
Jason Marino: The cost of transitioning IT service providers and incremental IT project spending to drive our digital and data initiatives. Finally, total company adjusted EBITDA would have declined 10% year-over-year in the fourth quarter, adjusting for Maui and the prior year alignment benefit, driven largely by those higher G&A costs. Moving to the balance sheet, we ended the quarter with more than $900 million in liquidity. We repurchased $38 million of common stock in the quarter and $286 million for the year, where 6% of our shares are outstanding.
Cost of transitioning it service providers and incremental project spending to drive our digital and data initiatives.
Jason Marino: Finally total company adjusted EBITDA would have declined 10% year over year in the fourth quarter adjusting for Maui and the prior year alignment benefit driven largely by those higher G&A costs.
Jason Marino: Moving to the balance sheet.
Jason Marino: We ended the quarter with more than $900 million in liquidity, we repurchased $38 million of common stock in the quarter and $286 million for the air or 6% of our shares outstanding.
Jason Marino: We also paid $106 million in dividends last year, bringing our total cash return to shareholders to nearly $400 million. We ended the year with net debt to adjusted EBITDA of 3.7 times, above our long-term target of 2.5 to 3 times. Given our current leverage, we think it is prudent to repay corporate debt while also returning cash to shareholders in the form of dividends and buybacks. We are targeting to get back to three times debt-to-adjusted EBITDA by the end of 2025. Moving on to our 2024 guidance. As you saw in our release last night, we expect our adjusted EBITDA to be between $760 million and $800 million this year.
Jason Marino: We also paid $106 million in dividends last year, bringing our total cash returned to shareholders to nearly $400 million.
Jason Marino: We ended the year with net debt to adjusted EBITDA of three seven times above our long term target of two and a half to three times gives.
Jason Marino: Given our current leverage we think it is prudent to repay corporate debt. While also returning cash to shareholders in the form of dividends and buybacks.
Jason Marino: We are targeting to get back to three times debt to adjusted EBITDA by the end of 2025.
Jason Marino: Moving onto our 2020 for guidance.
Jason Marino: As you saw in our release last night, we expect our adjusted EBITDA to be between $760 million and $800 million this year.
Jason Marino: With the abound transition behind us, growth in international contract sales, and a strong package pipeline, we expect both VPG and tourists to grow year over year. While Maui occupancy has recovered nicely, rebuilding our sales force is going to take more time, and we only expect to recoup a small portion of Maui's lost sales this year, making 2024 a rebuilding year for the Maui market. Because of the timing of the wildfires last year, we will have a more difficult comparison in the first half this year, though we will have an easier comparison in the second half. Even before Maui, we had a difficult VPG comparison in the first quarter due to last year's strong start.
Jason Marino: With the abound transition behind us growth and international contract sales and a strong package pipeline. We expect both V. P G into ours to grow year over year.
Jason Marino: Well Maui occupancy has recovered nicely rebuilding our sales force is going to take more time, and we only expect to recoup a small portion of Maui lost sales this year, making 2024, a rebuilding year for the Maui market.
Jason Marino: Because of the timing of the wildfires last year, we will have a more difficult comparison in the first half of this year do you have an easier comparison in the second half.
Jason Marino: Even before Maui, we had a difficult V. P. G comp in the first quarter due to last year's strong started the year. So I would expect sales to be flattish in Q1, this year, but to grow 6% to 9% for the year.
Jason Marino: So I would expect sales to be flattish in Q1 this year but to grow 6-9% for the year. We also expect tourists. We expect development profit to increase driven by higher contract sales. However, we expect development margin to be down a couple hundred basis points in the first quarter due to the Maui impact and higher costs, including the higher sales reserve on new note originations, which I mentioned on our last call. As a result, we expect development margin to be down slightly for the year. Financing revenue is expected to increase this year, but financing profit is expected to be down due to the continued resetting of borrowing costs in the ABS market, and rental profit will be impacted by higher inventory expense, both of which we mentioned on our last call. In our exchange and third-party management business, we expect interval members to remain relatively flat and for average revenue per member to increase slightly. Finally, we expect G&A expense to increase year-over-year due primarily to the return of variable compensation expenses.
Jason Marino: We also expect tourists.
Jason Marino: So we expect development profit to increase driven by the higher contract sales, we expect development margin to be down a couple of hundred basis points in the first quarter due to the Maui impact and higher costs, including the higher sales reserve and a new node originations, which I mentioned on our last call.
Jason Marino: As a result, we expect development margin to be down slightly for the year.
Jason Marino: Financing revenue is expected to increase this year, but financing profit is expected to be down due to the continued resetting of borrowing costs in the ABS market.
Jason Marino: And rental profit will be impacted by higher inventory expense, both of which we mentioned on our last call.
Jason Marino: In our exchange <unk> third party management business, we expect interval members to remain relatively flat for average revenue per member to increase slightly.
Jason Marino: Finally, we expect G&A expense to increase year over year due primarily to the return of variable compensation expense.
Jason Marino: Moving to cash flow, we expect our adjusted free cash flow conversion to be in the 55% range this year and adjusted free cash flow to be $400 million to $450 million. This is after our plans to spend $65 million to $85 million in non-inventory capital expenditures for IT investments and upgrades to existing sales centers, as well as roughly $65 million related to our new Waikiki project, which we expect to open later this year. We also ended the year with roughly $1 billion of inventory on the balance sheet, enough to support around $4 billion of future sales.
Jason Marino: Moving to cash flow.
Jason Marino: We expect our adjusted free cash flow conversion to be in the 55% range. This year and adjusted free cash flow to be 400 million to $5 $450 million.
Jason Marino: This is after our plans to spend $65 million this $85 million in non inventory capital expenditures for it investments and upgrades to existing sales centers as well Israeli roughly $65 million related to our new Waikiki project, which we expect to open later this year.
Jason Marino: We also ended the year with roughly $1 billion of inventory on our balance sheet enough to support around $4 billion of future sales.
Jason Marino: Looking back, we delivered nearly $1.8 billion in contract sales in 2023, and although things didn't go quite as well as expected, we did end the year on a positive note. Looking forward, we have a great business model with attractive margins and global growth opportunities. We also generate substantial free cash flow. As always, we appreciate your interest in Marriott Vacations Worldwide and will be happy to answer your questions now.
Jason Marino: Looking back we delivered nearly $1 8 billion in contract sales in 2023.
Jason Marino: Although things didn't go quite as well as expected we did end the year on a positive note.
Jason Marino: Looking forward, we have a great business model with attractive margins and global growth opportunities.
Jason Marino: We also generate substantial free cash flow.
Speaker Change: As always we appreciate your interest in Marriott vacations worldwide, and we'll be happy to answer your questions now.
Jason Marino: Operator.
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Brandt Montour: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Brandt Montour with Barclays. Please proceed with your question. Thanks for taking my question on a bound. Good to hear that you guys think you're through that.
Speaker Change: You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: In the interest of time, we ask that you each keep to one question and one follow up thank you.
Speaker Change: Our first question comes from the line of Brad <unk> with Barclays. Please proceed with your question.
Brad: Hey, everybody. Thanks for taking my question.
John E. Geller: Maybe you could just help us understand the sort of outlook for a bound and the nature of the rollout you have from here because I think we were under the impression that there were still sales centers that hadn't started selling a bound based on the residual supply of shared inflex product. The idea that there are sales centers that are used to selling the product makes sense. Are there any sales centers that haven't started selling it yet? What's the game plan to get them used to it, and what makes you confident that there's not going to be growing pains there?
John E. Geller: Sure. Yeah, a great question, Brant. From Yeah, the abound transition, really, other than the Sheraton sales centers here in Orlando, everybody has, you know, transitioned to it. We still, as we've talked about, have inventory left in the Sheraton Flex product that we got to continue to sell that out, right, so we can get to our OneTrust concept going forward, but keep in mind, all of our legacy products never go away, right? So, to the extent that we take back some Westin or Sheraton, you know, we'll continue to recycle that, right?
Brad: Centers here in Orlando, everybody has you know transition to it we still as we've talked about have inventory left in the the Sheraton flex product that we've got to continue to sell that outright. So we can get to.
Brad: R. One trust concept going forward, but keep in mind all of our legacy products never go away right. So to the extent, we we take back some western or share too you know will.
Brad: Continue to recycle that right and we will have that inventory available for people that might not be interested in the a bound program for whatever reason because they they bought the legacy west inflection they want more of that right. So I think we've got the right balance and I will tell you for the shirts and sales centers that have transition.
Brandt Montour: And we'll have that inventory available for people that might not be interested in the Abound program for whatever reason, because they bought the legacy WestinFlex and they want more of that, right? So, I think we've got the right balance, and I will tell you, for the Sheraton sales centers that have transitioned, they didn't really show a lot of impact, right? We saw that a little bit more in some of the Westin sales centers that transitioned, but like I said, the good news is, you know, we've got the VPGs, and as you can tell in the year over year numbers, right, compared, we're essentially flat in terms of the VPGs, so that gives you a sense of just the whole system. We're seeing good stability and, you know, positioning ourselves That's helpful. Thank you for that, John.
Brad: They they didn't really show a lot of impact right, we saw that a little bit more on some of the western sale centers that transition, but like I said the good news is.
Brad: We we've got the V P g's and as you can tell them the year over year numbers right compare we were were essentially flat right in terms of the V. P. G. So that gives you a sense from just the whole system.
Brad: Where she and good stability in in <unk>.
Brad: Positioning ourselves for some growthier on V P G going forward.
Speaker Change: That's that's helpful. Thank you for that John and and maybe for Jason or anybody.
Jason Marino: And then maybe for Jason or anybody, you know, honing in on the rental business, it sounds like you're implying that rental will be down from a profitability standpoint this year. Just maybe give us a sense. I mean, when we look back at the rental business back to 19, you know, 21 and 22 were recovering toward that rental profitability number nicely. 23 looks like it took a big step back, even below 21 on a sort of percent recovery of profitability. And then 24 sounds like it's going to be even lower.
Speaker Change: Honing in on the on the rental business.
Speaker Change: Uhm it sounds like there's gonna it sounds like you're implying that rental will be down on a profitability from a profitability standpoint. This year, just maybe give us a sense I mean, when we look back at the rental business back to 19.
Speaker Change: 21, and 22 was recovering toward that rental profitability.
Speaker Change: Number nicely twenty-three looks like it took a big step back even below 21 on a on a sort of per cent recovery of profitability and then 24. It sounds like it's gonna be even lower so I guess, what what's going on in that business from a longer term lens.
Brandt Montour: So I guess what's going on in that business from a longer-term lens? Yeah, at this point, we are, you know, expecting rental profits for 24, as we talked about in the last quarter, to be down a little bit versus what we saw in 23. We're obviously working extremely hard to get some growth in that this year, but that'll really depend on demand here in North America from an occupancy perspective. So, yeah, what we saw from 22 to 23 was in our higher-end markets, like we talked about versus our expectations coming into 23, we saw rental rates in places like Hawaii, even Florida Beach, as we said, travel pattern shifts, a lot of your higher-end customers going abroad, you were up So you saw some of that.
Speaker Change: Yeah at this point, we are you know <unk>.
Speaker Change: Expecting rental profits for 2004, as we talked about on the last quarter to be down a little bit versus what we saw in twenty-three.
Speaker Change: We're obviously working.
Speaker Change: Extremely hard to to get some growth and that this year, but.
Speaker Change: That will really depend on demand here in North America from an occupancy perspective, so yeah. What we saw from from 22 to 23 was in our higher end markets like we talked about verse or expectations coming into twenty-three we saw rental rates in places like.
Speaker Change: Why even Florida Beach.
Speaker Change: As we said travel patterns shifts a lot of your higher end customer.
Speaker Change: Going abroad, Europe last year, So you saw some of that and and with the lower adr's depth.
Jason Marino: And with the lower ADRs, you definitely saw some lower occupancy rates in those markets. And I'm not sure we were any different than any other resorts in those markets. We kind of performed in line, if you will, with some of the star reports, et cetera. So that was part of the shift. And then this year, right, as we talked about, we've got higher maintenance fees, which on the unsold inventory we pay. Part of how the market shapes up, we talked about 24, what's on the books, right? We're a couple points higher than the same time last year in total for North America, as well as international.
Speaker Change: Definitely saw some lower occupancies in those markets and I'm not sure where any different than any other resorts in those markets. We kind of performed in line. If you will with some of the you know the star reports et cetera. So.
Speaker Change: That was some of the shift and then this year right as we talked about we've got higher maintenance fees, which on the unsold inventory we pay part of how the market you know shapes up we talk about 24, what's on the books right, where a couple of points higher same time last year in total for North America as well.
Speaker Change: International So.
Jason Marino: So that's a good sign at this point, but it will depend a little bit on some of these higher-end markets. And does the summer demand continue to come back, and are we able to drive our rates, et cetera? And then the other thing that we've shifted more, we talk about growing our contract sales and packages. We've got over 250,000 packages on the books.
Speaker Change: That's a good sign at this point, but it will depend a little bit on some of these higher end markets and does the summer demand continue to come back and are we able to drive our rates et cetera. So and then the other thing that we've shifted more we talk about growing our contract sales and packages right. We've got over 250000.
Speaker Change: Packages on the books as we sell that we use rental inventory to to drive package growth. So we've been very successful with with some of our.
Jason Marino: As we sell that, we use rental inventory to drive package growth. And so we've been very successful with some of our different marketing channels to drive package sales. And so there's been a bit of a shift too over the last couple of years of using more of our rental keys to drive contract sales, which we think is the right long-term trade-off, if you will. It's always a balance, but to drive the long-term growth of the company. Great
Speaker Change: Different marketing channels to drive package sales and so there's been a bit of a shift to over the last couple of years of using more of our rental keys to drive contract sales, which he thinks the the right long term tradeoff. If you will it's always a balance but to drive the long term growth of the company.
Speaker Change: Great. Thank you.
Chris Woronka: Thank you. Yeah. Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question. Hey, good morning, guys. Good morning, Chris.
Speaker Change: Yep.
Speaker Change: Thinking our next question comes from the line of Chris.
Chris: Please proceed with your questions.
Chris: <unk> a good morning, guys Lauren encroached, taking the question.
Operator: Morning. I'm taking the questions. Morning.
Jason Marino: So, you know, I guess, can you guys talk a little bit about finance propensity and whether you're seeing any changes in their response to where rates are or just the fact that maybe folks have a little less cash in the, you know, in the bank or in their pockets. Any change there that you're picking up? Yeah, Chris, we're not seeing a whole lot in terms of the propensities that we saw, you know, throughout the course of last year. They're a little bit higher than they were in 2022, but we've been running in that mid-50s, high-50s propensity here for a few quarters. So we don't really see too many changes coming, you know, due to the environment out there right now. Okay, thanks, Jason. And then as a follow-up. John, I know you just mentioned that the maintenance fees are a little bit of a headwind on the unsold inventory. Do you have any visibility?
Chris: So.
Chris: I guess.
Chris: Can you guys talk a little bit about finance propensity and whether you're seeing a D. <unk>.
Chris: Changes their response to.
Lauren: Where rates are or just the fact that maybe folks out a little less cash and that you know in the bank or in their pockets any any change there that you're picking up on.
Speaker Change: Yeah, Chris we're not seeing a whole lot in terms of the propensity that we saw throughout the course of last year, they're a little bit higher than they were in 2022, but we've been running in that mid fifties fifties.
Chris: And city here for a few corners so.
Chris: We don't really see too many changes coming due to the environment out there as of now.
Speaker Change: Okay. Thank thanks, Jason and then as a follow up.
Speaker Change: John I know you just mentioned the maintenance fees are a little bit of a headwind on the on soul inventory.
Speaker Change: Did you have any visibility I I know that sometimes an issue of like property insurance and taxes, especially in Florida, but sure Gimme visibility on that going forward and then also is there any is there any concern I guess if that ultimately.
Chris Woronka: I know that's sometimes an issue of property insurance and taxes, especially in Florida, but do you have any visibility on that going forward? And then also, you know, is there any concern, I guess, that ultimately, those maintenance fees to the customer, not on your on-sold inventory but on the owned inventory, that becomes a tipping point for some folks? Uh, you know, to start with your last question, I guess it could let me give you a little perspective, though, in terms of right now, with if you're a first time buyer, right, you come in and buy our product. The average first time buyer buys about $30,000 worth of product. Their maintenance fee this year would be, you know, $1,350, right?
Speaker Change: Those maintenance fees to the customer not on your on hold inventory of it on the old inventory.
Speaker Change: That becomes a tipping point for for some folks.
Speaker Change: You know to start with your last question I guess it could let me let me give you a little perspective, though in terms of right now with with if you're a first time buyer right you come in and buy our product average first time buyer buys about yeah.
Speaker Change: $30000 worth of product their maintenance fee. This year would be 1300 $50 right. So while the percentage increases big Chris right and we're working.
John E. Geller: So while the percentage increase is big, Chris, and we're working, you know, to get it back down to that kind of mid to low single digits more like we've seen, even with the higher increases we've seen, if you look at it from like 19 to 24, the, you know, compounded annual average increases are in that 4 or 5%, right? Because you had, you know, a little increase because of some of the COVID stuff. And so on an average basis, you have that, but you hit on some of the things, property taxes, you know, higher insurance, but labor's your biggest cost.
Speaker Change: To get it back down.
Speaker Change: In that kind of mid to low single digits more like we've seen even with the higher increases we've seen if you look at it from like 1924.
Speaker Change: The compounded annual average increases is in that four or 5% right because you had.
Speaker Change: Little increase because of some of the COVID-19 stuff and so on an average basis.
Speaker Change: You have that but you know you hit on some of the things property taxes.
Speaker Change: Higher insurance, but labors your your biggest cost and you know maybe a little different than some of our competitors. If you look at the markets were in we've got 12 resorts in Hawaii right. We've got eight in Hilton head.
John E. Geller: And, you know, maybe a little different than some of our competitors. If you look at the markets we're in, you know, we've got 12 resorts in Hawaii, right? We've got eight in Hilton Head.
John E. Geller: And in those markets coming out of COVID, It was, you know, we saw wage increases in a lot of our markets. We're, you know, we're in higher cost markets. We've seen that stabilize, right?
Speaker Change: And in those markets coming out of Covid.
Speaker Change: It was.
Speaker Change: We saw the wage increase is a lot of our markets. We're we're in higher cost markets. We've seen that stabilized right. So that's a good factor going forward and you know notwithstanding inflation is not back to where the fed wants it.
John E. Geller: So that's a good factor going forward. And, you know, inflation's not back to where the Fed wants it, that moderation, right? But we're already looking at maintenance fees for next year. We're looking for ways to offset increases we've seen and get that back to, you know, what we've seen on a more historic level in terms of inflationary increases in maintenance fees. Okay, very helpful.
Speaker Change: That moderation right, but we're already looking at maintenance fees for next year or we're looking for ways to offset increases we've seen in and get that back to what we've seen for on a more historical level in terms of inflationary increases in the maintenance fees.
Speaker Change: Okay very helpful. Thanks, guys.
Chris Woronka: Thanks, guys. Yep. Thank you. Our next question comes from the line of Patrick Scholes with True Securities. Please proceed with your question. Good morning, everyone.
Speaker Change: Thank you.
Speaker Change: Thinking our next question comes from the line of Patrick Schools with Truth. Please proceed with your questions.
Patrick Scholes: Hi, good morning, good morning, everyone.
Patrick Scholes: A couple questions here, you know. Can you quantify what you think the lingering Ibada hit in Hawaii will be for this year? That's my first question. Sure. Like a lot of questions, it's not an easy question.
Patrick Scholes: A couple of questions here.
Patrick Scholes: Quantify what do you think the the lingering.
Patrick Scholes: EBITDA hit in Hawaii is for for this year.
Patrick Scholes: My first question.
Patrick Scholes: Sure.
Speaker Change: Yeah that question sounded easy easy question I mean, we talked about.
John E. Geller: We talked about occupancies in Maui having gotten back close. You've got to remember, we've historically run a 95, 96% year-round occupancy in Maui. In January, we're back to 92%. The outlook's good. We're pretty close to where we want to be.
Speaker Change: Occupancies in Maui have gotten back close not.
Speaker Change: I remember, we historically 190, 596% year round occupancy in Mali.
Speaker Change: We're in January we're back to 92% so.
Speaker Change: Yeah. The outlooks, good we're pretty close to where we want to be I think you've gotta think about recovery in Maui higher level on contract sales right. What are we doing at our sales centers.
John E. Geller: I think you've got to think about recovery in Maui at the high level of contract sales. What are we doing at our sales centers, and are we getting back there? Because when you start to talk about EBITDA, Patrick, obviously, our business isn't static. You got higher unsold maintenance fees that are going to impact rental rates in Hawaii this year that we didn't have last year. It is more about our occupancy. Is that back to where we want it to be? Close.
Speaker Change: We get back there because when you start to talk about EBIT, Patrick obviously, our businesses and static right you got yeah higher unsold maintenance fees that are going to impact rentals in Hawaii that this year that we didn't have last year right. So it is more about our occupancy is that back to where we want it to be.
Speaker Change: Close right rental occupancies still running a little bit lower than it would have been at last last year. So got to continue to drive transient rental occupancy in Maui, Rachel be what the market all right and that's what I mean, it's just.
John E. Geller: Rental occupancy's still running a little bit lower than it would have been last year, so it has to continue to drive transient rental occupancy in Maui. Rates will be what the market is, and that's what I mean. You're not bridging apples to apples if you're trying to calculate what rates are this year versus last year because that's not anything potentially to do with the wildfires as much as just demand in the market
Speaker Change: You're not bridging apples to apples, if you're trying to.
Speaker Change: Calculate what rates are this year versus last year, and how does that cause that's anything potentially to do with with the wildfires as much as just demand in the market. So.
John E. Geller: We do expect contract sales. As Jason mentioned, we've got a tougher comp as we go through the year. We expect, obviously, an easier comp in the second half of the year.
Speaker Change: We do expect contract sales yeah. It was Jason mentioned, we've got a tougher cop as we as we go through the year.
Speaker Change: We expect.
Speaker Change: The easier comp and the second half of the year, and that's where do over.
John E. Geller: That's where our overhead from a marketing and sales perspective, leadership and all that, we still retain those people because Maui's going to come back. We're going to be getting sales back to where they were pre-fires as we go through the year. The other wild card I'll put out there, which, once again, is why our contract sales will be... We expect them right now to be slightly higher than actuals in 23, but we have a major refurb at our Maui Ocean Club that is unrelated to the wildfires that starts in the second half of the year. That was always planned, and that work will start, which will impact Maui's sales in a way unrelated to the
Speaker Change: Overhead from a marketing and sales perspective leadership and all that.
Speaker Change: We still retain those people because we argued that was going to come back right. We're gonna be getting sales back to where they were pre buyers as we go through the year and then the other wildcard I'll put out there, which once again is why our contract sales will be we expect them right now to be slightly higher than actual and twenty-three, but we have Ah may.
Speaker Change: Major reefer about our Maui Ocean club that was unrelated to the the wildfires that.
Speaker Change: Starts in the second half of the year right. So that was always planned and that work will start which will impact Maui sails unrelated to the wildfire. So contract sales I think if you go back to the top line.
Patrick Scholes: Contract sales, I think, if you go back to the top line, even with the refurb project, should be up year over year, call it five-ish, plus or minus a million dollars. We do expect, as we work our way through the second half of the year, to be much closer to where we were last year. Okay, thank you. And then I have just two more questions here. We think about potential for stock buybacks, given your guidance for free cash flow, you also throw out some 65 to 80 million of CapEx, pay to dividend, you know, ballpark, 50 million a quarter, you know, firing any surprises or additional CapEx. Is that a fair way to think about it?
Speaker Change: Even with the Reefer project.
Speaker Change: Should be up year over year.
Speaker Change: Call at five ish, plus or minus million dollars, but we do expect as we kind of work our way through the second half of the year to be be much closer to where we were last year.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: Two more questions here, we think about potential for Scott saving for stock buybacks.
Speaker Change: Given your guidance for.
Speaker Change: Free cash flow y'all sore throat out some $65 million capex paid a dividend ballpark $50 million a quarter.
Speaker Change: Alright any.
Speaker Change: Surprises or it gets more capex is that a fair way to think about it.
John E. Geller: Yeah, I mean, as Jason said in his comments, given our lower EBITDA, our leverage is a little bit higher. Our goal has always been to be in that two and a half to three times range; we're above three times. We're going to continue. I'm not going to sit here today and say, yeah, we're going to return all that capital. As Jason said, we're going to evaluate, right, in terms of do we bring down debt a little bit as we go forward here, as EBITDA recovers or not, right? That's the plan.
Speaker Change: Yeah, I mean, it is Jason said in his comments.
Speaker Change: Given our lower EBITDAR leverage is a little bit higher.
Speaker Change: Goal has always been to be in that two and a half to three times, we're above the three times we're.
Speaker Change: We're going to continue I, yeah, I'm not gonna sit here today I mean it.
Speaker Change: Yeah, we're going to return all that capitalization said, we're going to evaluate right in terms of do do we bring down that a little bit as we go forward here Z, but the recovers or not right.
Speaker Change: That's the that's the plan our goal is to get back to that three times through a combination of EBITDA growth.
John E. Geller: Our goal is to get back to that three times, through a combination of EBITDA growth and potentially paying down some debt. The good news is that when you look at that free cash flow as well as what we'd expect to grow free cash flow next year, we can do both, right? I think we can pay down some debt and continue to return capital to shareholders, which we think is the right balance. That will be based on facts and circumstances as we go forward.
Speaker Change: And potentially paying down some that the good news is when you look at that free cash flow as well as what we'd expect to grow free cash flow next year, well, we can do both right I think we can.
Speaker Change: Pay down some debt and continue to return capital to shareholders, which we think is the right balance and that will be based on facts and circumstances as we go forward.
Patrick Scholes: Okay, thank you. Just last question. It looks like G&A was up about a little over 30% for the quarter. You may have talked about in the prepared remark, why though, if you could just remind me, number one, what was driving that increase in G&A and what's the right way to think about it, a quarterly run rate going forward for the year. Thank you. That's it.
Speaker Change: Okay. Thank you and just last question with like G&A was up about a little over 30% for the quarter. You may have talked about in the prepared <unk> why though if you'd just remind me number one what was driving that <unk>.
Speaker Change: Increase in G and a and what's a right way to think about it a quarterly run rate going forward for the year. Thank you that's it.
Jason Marino: Yeah, thanks Patrick. So, in our prepared remarks, we did talk a little bit about what drove the... $20 million increase year over year. We had some more one-time transition costs, moving our IT service providers. We did have some timing and some incremental project expenses, and then we did see some wage increases year over year, so that was really the bulk of it. Some of that is not really a good run rate number going forward, so I would look more towards the guidance in terms of G&A. We're going to see a little bit higher G&A next year due to the return of the variable compensation, and that's the way I would think about it. I wouldn't look to Q4 as a run rate. Okay, thank you for that. I'll do it.
Speaker Change: Yeah. Thanks, Patrick So yeah and are prepared remarks, we did talk a little bit about what drove the.
Speaker Change: The 29th increase you over a year, we add add some cough more one time transition costs moving our I T service providers, we did have some timing and some incremental project expense now we did see some wage increases you over a year. So that was really the bulk of it some of that is not really a good run right number.
Speaker Change: Going forward, so I would like more towards the guidance in terms of G&A, we're gonna see a little bit higher G&A next year due to the return of the variable compensation and that's the way I would think about it I wouldn't look too.
Speaker Change: Does it run right.
Speaker Change: Okay.
Speaker Change: Thank you for thank you for that.
Patrick Scholes: Thanks, Patrick. Thank you. Our next question comes from the line of Ryan Lambert with J.P. Morgan. Please proceed with your question.
Speaker Change: Permission Jose.
Jose: Thanks, Patrick.
Patrick: Thank you. Our next question comes from the line Orion member J P. Morgan. Please proceed with your question.
Speaker Change: Hi, Thanks for taking my question I'm, just going back to the I T spending real quick and you talked about how something that was related to transitioning providers and some was more investment related can talk about what kind of enhancements that spend as driving and and then after that I have a follow up.
Ryan Lambert: Thanks for taking my question. Just going back to the IT spend real quick, and you talked about how some of that was related to transitioning providers and some was more investment-related. Can you talk about what kind of enhancements that spend is driving? And then after that, I have a follow-up.
Jason Marino: Thanks. Yeah, so as we've been talking about modernizing our operating platforms, that's a lot of the continuation that you see in terms of the spending that we did in Q4. The fair amount of this is still a little bit foundational, but it's all in an effort to really enhance the self-service in our data analytic capabilities, so self-service for both the associates as well as the owners in terms of booking, searching, and things like that. So that's really where the bulk of our spending was in Q4 from a project standpoint. Thanks.
Speaker Change: Yeah, So I haven't really been talking about modernizing our operating platforms. That's a lot of the continuation that you see in terms of the spending that we did in Q4.
Speaker Change:
Patrick: A fair amount of this is still a little bit foundational, but it's all in an effort to really enhance the self service in our data analytic capability. So self service for both the associates as well as the owners in terms of bookings searching.
Patrick: And things like that so that's really where the bulk of our spending was in queue for from a project standpoint.
Speaker Change: Thanks, and the last quarter, you've had called out a bit of a difference between the higher end and lower end customer spending patterns has this kind of change it all wide under contracted in any meaningful way.
Ryan Lambert: And last quarter, you kind of called out a bit of a difference between the higher end and lower end customer spending patterns. Has this gap kind of changed at all, widened or contracted in any meaningful way? What was the, I'm sorry, what did we call out last quarter that you were referencing? Just kind of the bifurcation between the higher and lower ends, specifically referring to the FICO bands. Is that different at all?
Speaker Change: What what what was the I'm sorry, what did we call out last quarter that you're referencing.
Speaker Change: Just kind of the the bifurcation between the higher and lower and specifically to the <unk>, referring to the Psycho bands what is <unk>.
Speaker Change: Is that different at all.
John E. Geller: I'll defer to Jason a little bit. We haven't really seen any changes in our average FICO scores or where the loans are coming from. As we've always talked about, our marketing, because we do direct marketing and we're looking for certain customer demographics in terms of household income and people that can afford our price point, that when people show up at our sales centers, because we don't do OPC off-premise and things like that, they're usually very well-qualified. That's why we've always had a 720, 730 FICO score. I'm not aware of any shifts and things like that.
Speaker Change: No I don't think we're <unk>.
Speaker Change: Jason a little bit, but we haven't really seen any changes in our in our Psycho average playclothes scores in and where the where the loans are coming from.
Speaker Change: As we've always talked about.
Speaker Change: Our marketing because we do direct marketing and we're looking for <unk>.
Speaker Change: Certain customer demographics right in terms of household income and people that can.
Speaker Change: Afford our price point that when people show up to our sales centers, because we don't do O P. C off premise and things like that they're usually very well qualified and that's why we've always had a a 702730 psychos score so I don't.
Speaker Change: Not aware of any shifts and things like that that's been pretty consistent over 10, 15 years and when you look at our average transaction size across the board they've increased slightly over the years, mostly due to the pricing increases that we've implemented fairly consistently show average transaction size doesn't really change too much for us as well.
John E. Geller: That's been pretty consistent over 10, 15 years. When you look at our average transaction size across the board, it's increased slightly over the years, mostly due to the pricing increases that we've implemented fairly consistently. Average transaction size doesn't really change too much for us as we look forward. Thanks. Thank you. Good morning, everyone.
Speaker Change: As we look forward.
Speaker Change: Thanks.
Speaker Change: Thinking our next question comes from the Bank of America.
Unnamed Analyst: Thanks for taking my questions. I just wanted to go back to some of the core underlying drivers for contract sales, if we could.
Speaker Change: With your question.
Speaker Change: Hi, Good morning, everyone. Thanks for taking my questions. Just wanted to go back to that some of the core underlying drivers for the the contract sales. If we could so I apologize I think I missed a part of this in the prepared remarks, but but he did talk a little bit about the breakdown between or anticipate a breakdown between tour flow N D. P G to.
John E. Geller: I think I missed a part of this in the prepared remarks, but you did talk a little bit about the breakdown between – or anticipated breakdown between Torflow and BPG to get to the 6% to 9%. Could you just give us a little bit more color? And specifically, I think, obviously, if we assume some tougher comps in Q1, which I think you alluded to, or maybe even the first half, it implies some pretty significant acceleration in the second half. Should we see that more in Torflow, particularly around Maui, in the second half? Or how should BPG balance in there, too?
Speaker Change: Get to the 6% to 9% could you just give us a little bit more color and specifically I think you know obviously, if we assume some tougher comps and Q1, which I think you alluded to are certainly <unk> or maybe even the first half.
Speaker Change: It it apply some some pretty significant acceleration shall we seen in the second half should we see that more interflow, particularly around nally in the second half or you know how should V. P. G balance in there too is that you will also see some mix benefit.
Unnamed Analyst: Do we also see some mixed benefit from Hawaii coming back online in the back half, too? Yeah, yeah, we didn't, um, you didn't miss anything. We didn't, we didn't guide any. www.marriottvacationsworldwide.com. Generally, we probably should get some higher tour growth than VPG, if you think about it that way. And as you hit on, and Jason mentioned, yeah, you got a tougher comp in the beginning of the year, not only from the Maui impact, but if you recall, coming out of 22 into 23, I mean, first quarter last So you do have some tougher overall comps in the beginning of the year, and as we talked about last year, you saw VPGs trend down a bit as you went through the balance of the year, but then as we got into the third and fourth quarters, you really got that stabilization, and we feel good that that's where we have the ability to hopefully push some pricing and drive VPGs.
Speaker Change: From Hawaii, that's online and in the backyard.
Speaker Change: Yeah, Yeah, we didn't.
Speaker Change: You didn't Miss anything we didn't we didn't guide.
Speaker Change: Around the P G and tore growth, though I will say high level, we expect to get growth in both right. That's the that's the plan.
Speaker Change: Yeah.
Speaker Change: Generally we probably should get you know.
Speaker Change: Some higher tour growth in V. P. G. If if you think about it that way.
Speaker Change: And as you hit on and Jason mentioned, Yeah, you Gotta, you Gotta tougher comp in the beginning of the year of your just not only from.
Speaker Change: The Maui impact, but if you recall coming out of 22 into twenty-three I mean first quarter last year contract sales were up 10% over 2022, right. So you do have some tougher.
Speaker Change: Overall comps and that in the beginning of the year.
Speaker Change: As we talked about last year, you saw D. P g's trend down a bit as you went through the balance of the year, but then as we got into the third and fourth quarter.
Speaker Change: Got that stabilization and we feel good that that's where we have the ability to hopefully push some pricing and drive <unk>.
Unnamed Analyst: The other place we'll continue to, as we mentioned on the call, we didn't guide growth, but international contract sales grew 50% last year. Now it's only, you know, 10% of our business versus North America in terms of how to think about that, but Asia is still recovering in terms of coming out of COVID, and so we expect stronger growth in some of our international business, that's going to be driven by tour flow and some VPG as well. And then even within the Hyatt business, as we talked about, as we brought together the Hyatt and legacy wealth portfolios, and we shifted in terms of our marketing channels and driving some growth that way. So there's a lot of moving parts in there, but when you put it all together, we expect the first half of the year to be a little bit less growth, given the tougher comps.
Speaker Change: The other place will continued as we mentioned on the call we didn't guide growth, but we had.
Speaker Change: International contract sales grew 50 per cent last year now it's only.
Speaker Change: 10% of our business versus North America in terms of how to think about that but Ah Asia still recovering in terms of coming out of Covid.
Speaker Change: So we expect stronger growth and some of our international that's going to be driven by tour flow and some V. P G as well.
Speaker Change: And the higher business as we talked about as we brought together the highest and legacy wealth portfolios.
Speaker Change: And we shipped in terms of our marketing channels and driving some growth that way.
Jason: So there's a lot a lot of.
Unnamed Analyst: A lot of moving parts in there, but when you put it all together, we expect first half of the year to be a little bit less goes given the tougher comps second half as you mentioned as well.
Unnamed Analyst: Second half, as you mentioned as well, you had the Maui fires, and obviously, that impacted contract sales by 50 plus million dollars in the second half of the year. So that should be helpful from an easier comp and just pure growth year over year. And my second question would just be, are there any constraints on the Torflow side that are company specific?
Unnamed Analyst: You had the Maui fires and obviously that impacted contract sales 50 plus million dollars in the second half of the year. So.
Unnamed Analyst: That should be.
Speaker Change: Helpful from an easier confidence so pure growth year over year.
Unnamed Analyst: And my my second question would just be are there any constraints on the tour flow side that are that are company specific and and the reason I ask is and we see the piers they've been growing tour flow low double digits, maybe even a little bit better than that over the last you know three to three four quarters on the.
John E. Geller: And the reason I ask is that when we see the peers, they've been growing Torflow at low double digits, maybe even a little bit better than that over the last three, two, three, four quarters. VAC is obviously, and again, a lot of noise from Maui, so I appreciate that it's not entirely apples to apples, but it's been much more in the low single digits, and even in the 4Q, even if we add back Maui, you're only at 4%, versus I think one of the peers, which was a low double digit. So to accelerate that, are there any constraints, any issues with inventory, or challenges to doing so? Or is it basically just turning on Tor channels, and how do you not compromise that higher quality guest and purchaser that you're looking for and still be able to drive that type of level of growth?
John E. Geller: He is obviously and again a lot of noise from alley. So I appreciate that it's not it's not entirely apples.
John E. Geller: But it's been much more in the low single digit needed in the four Q, even if we add back now you're only at 4% versus I didn't want it appears which is low double digit so to accelerate that are there any constraints any issues with inventory. Your challenges you. So anything in that or is it basically just turning on tour channels.
John E. Geller: And how do you not compromised at higher quality guest and and and purchase or that you're looking for it's still able to drive that type of level of of growth.
John E. Geller: Sure, yeah, so for us, when you think about where our tours come from, like we've talked about, in-house, our owners, you know, first and foremost, staying at our resorts. The good news is, you know, to get owners to take tours, get them interested, maybe in buying more, you have that stuff to talk to them about, right? So things like the Abound program and coming in and, you know, getting tour capture rates there, announcing new resorts like Waikiki that's opening later this year, Charleston and Savannah, more resorts in Asia Pacific, right, that's always going to be how do we continue to drive those tours. Rentals, right; when we can get tours from people that are renting our product, they can be very good tours because they're usually paying a So we're always going to continue to look at what we call our capture rate and drive in-house.
Speaker Change: Sure death, so for us when you think about where our tourist come from like we've talked about.
John E. Geller: In house or owners first and foremost staying at our resorts.
John E. Geller: The good news is you know to get owners take tours get them interested maybe in buying more yeah that stuff to talk to them about right. So things like the a bound program and coming in and getting tore capture right, Sir announcing new resorts like Waikiki. That's opening later this year Charles.
John E. Geller: In Savannah more resorts in Asia Pacific right.
John E. Geller: That's always going to be how do we continue to drive those stores rentals right. When we can get tours from people that are renting our product they're they can be very good tours, because they're usually paying a lot to rent our product and then they see the value proposition coming off some of the what they are paying the rent and it makes a lotta sense. So.
John E. Geller: We're always going to continue to look at what we call our capture right and drive in house I mentioned packages.
John E. Geller: I mentioned packages, and we continue to increase tours by... taking rentals that we would otherwise rent on the open market and selling packages into that, right? And we're growing our tour flow on the package side. And then there's, you know, the stuff that happens in our markets like linkage.
John E. Geller: We continue to increase tours by.
John E. Geller: Taking rentals that we've otherwise ran on the open market and sell packages into that right. We're grown our tour flow on the package side and that is the stuff that happens in our markets like linkage, we still have linkage opportunity and a lot of our markets.
John E. Geller: We still have linkage opportunities in a lot of our markets. We do, you know, what we call roadshows and events, which can drive tour flow. We continue to focus on driving tours through virtual methods that we learned to do very well coming out of COVID. So you have got a lot of channels. But at the same time, yeah, we're, you know, while our tour growth is 15%, you haven't seen our VPG drop. It's been flattish, right?
John E. Geller: We do what we call road shows.
John E. Geller: Which can drive tour flow, we continue to focus on driving tours through virtual methods that we learn to do very well coming out of Covid. So you got a lot of channels.
John E. Geller: But at the same time yeah.
John E. Geller: While our tour growth is 15% you haven't seen R. V. P. G drop it's been flattish right. So and this is where I think we should we talk about the investments in technology, what we're doing with sales force Howard.
John E. Geller: So, and this is where I think, you know, as we talk about the investments in technology, what we're doing with Salesforce, how we're, you know, investing in data and analytics for us, it's all about focusing and getting the right tours, right, to drive those VPGs. And that's where I think the opportunity continues to be. How do we open up the funnel, get more folks, market to the right folks, and then, you know, be able to sell to them? And that's always going to be the focus here as we go forward. Thank you very much, www.youtube.com or the YouTube channel of your choice.
John E. Geller: Investing in data and analytics for us, it's all about focusing and getting the right tours right to drive those V. P G's, and that's where I think the opportunity continues to be how do we open up the funnel get more folks market to the right folks.
John E. Geller: And then.
John E. Geller: Be able to sell to them and that's always going to be the focus here as we go forward.
Speaker Change: Thank you very much.
John E. Geller: Yep.
John E. Geller: Thank you as a reminder, if you'd like to join the question can you. Please press star one on your telephone keypad. Our next question comes from the line of David Cats with Jeffrey. Please proceed with your question.
Operator: Thank you. As a reminder, if you'd like to join the question queue, please press the star 1 on your telephone keypad. Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.
David Katz: Hi, Good morning, everyone. Thanks for taking my question I wanted to just circle, you've given us a ton of detail and I I I appreciate that and the outlook Uhm, what I wanted to just drill down a little deeper on his you know in the release and in the opening remarks that are bound you know the the conversion is behind.
David Katz: Thanks for taking my question. I wanted to just circle back, you've given us a ton of detail. And I appreciate that in the outlook. What I wanted to just drill down a little deeper on is, you know, in the release and in the opening remarks, you know, that abundance, you know, the conversion is behind us. And I wanted to see if there are some specific data points or specifics around, you know, how, you know, what's behind that, and how we know, so to speak.
David Katz: And us and I wanted to see if there are some specific data points or or specifics around you know how how.
David Katz: You know, what what's behind that and how we <unk>.
Speaker Change: We know.
David Katz: So to speak.
John E. Geller: Sure. VPGs are always the best data point, David, when you look at what VPGs were down in the second quarter and why we were talking about the transition to Avound even before the second quarter. We said, anytime you launch a new product, there's transition impact: owners understanding the new product, the salespeople, notwithstanding a lot of training and retraining, selling a different product, and owners, like we talked about, they bought a different product.
Speaker Change: Sure V P. G's always the best data point, David when you look at what D. P. Geez, we're down to the second quarter why we were talking about the transition to about even before the second quarter. We said anytime you launch a new product there's transition impact owners understanding the new products the salespeople yep.
John E. Geller: Notwithstanding a lot of training and retraining selling a different product in an owner like we talked about they bought a different product now you're you're selling them something new and that's where you saw the impact and <unk>.
John E. Geller: Now you're selling them something new, and that's where you saw the impact in Vistana. I want to say all of the VPG down in the second quarter last year was the transition, but I think our VPGs were down 15% year over year. It was a tougher comp, but I think we talked about at the time that our Marriott non-transition sites, they were down probably low single digits, right?
John E. Geller: Wanted to say all of the V. P. G down in the second quarter last year was the transition, but I think our V. P G or down 15% year over year was a tougher cop, but I think we talked about at the time or marry a non transition sites. You know they were down probably low single digits right and so fast forward we saw.
John E. Geller: And so fast forward, we saw the third quarter, we talked about it sequentially, those legacy sites, we saw the VPGs bounce back up in the third quarter, and we continued to see improvement as we got into the fourth quarter. Now, when you look at overall VPGs for the system, fourth quarter, adjusting for Maui, they were essentially flat in fourth quarter this year versus fourth quarter last year, and fourth quarter last year was probably a tough Our VPGs from the system were running better, so that is a combination of all our sales centers, but that's why I feel pretty confident that we're there and we're moving forward with that softness that we really saw mostly in the second quarter behind us. Perfect. VPG is the focus.
John E. Geller: Third quarter, we talked about it sequentially. There's legacy sites, we saw the V. P. G bounce back up in the third quarter and we continue to see improvement as we got into the fourth quarter and now when you look at overall <unk> for the system Fourthquarter.
John E. Geller: Justin for Maui, They were essentially flat fourth quarter this year versus fourth quarter last year and four square last year was probably have a tougher cop radar btg's from our system. We're running better. So that is a combination of all our sales centers, but that's how I feel pretty confident in that we were there and we're moving forward.
John E. Geller: And that softness that we really are mostly in the second quarter's behind us.
John E. Geller: Perfect V P G as as the poker sent with respect to the I T and analytics investments.
John E. Geller: And with respect to the IT and analytics investments, can you just color that in a bit more as to sort of what you're getting and why now? And is that something that will continue beyond 2024 as well, or is this more of a one-time focused investment? Sure.
John E. Geller: Can you just color that in a bit more is to sort of what what you're getting and why now and is that something that you know continues beyond 2024, as well or or or is this more of a one time you know focused investment.
John E. Geller: Now, let's take a step back, just not data and analytics, but we're going to continue to enhance our IT capabilities, and what do I mean by that? We obviously have been a company in business for 40 years, and we've talked about how you got a lot of legacy, homegrown IT systems, there's a lot better technology, and then as you go forward, we've done a couple acquisitions who, you know, Vistana had their own legacy systems, and while we integrated that and drove synergies, a lot of that work going forward is how do you continue to get efficiencies and, you know, leverage our technology platforms, and we're going to continue to focus on that, and with those enhancements, whether it's data and analytics, right, you know, getting our IT costs down by, you know, continuing to modernize applications that we're using, platforms, things like that, that's where we'll, you know, and it's an ongoing journey, I think it is for any company.
John E. Geller: Sure.
John E. Geller: Let's take a step back just not data and analytics, but.
John E. Geller: We're gonna continue to enhance our I T capabilities and what do I mean by that we obviously have.
John E. Geller: Have been accompanied in business for 40 years, and we've talked about how you got a lot of legacy.
John E. Geller: Home grown systems, a lot better technology than that as you go forward, we've done a couple of acquisitions, who <unk>.
John E. Geller: Stay in a had their own legacy systems, and while we integrated that and drove synergies.
John E. Geller: A lot of that work going forward is how do you continue to get efficiencies.
John E. Geller: And leverage our technology platforms, and we're going to continue to focus on that and with those enhancements, whether it's data and analytics sprite.
John E. Geller: Getting our I T costs down by.
John E. Geller: Continuing to Modernise applications that were using platforms things like that.
John E. Geller: That's where will you know and it's an ongoing journey I think it is for any company technology changes, so fast and there's more and more opportunities to leverage technology, and ultimately with things like AI, right and and the ability I think over time to drive more efficiencies in the business and self service of our owners it's a huge.
John E. Geller: Technology changes so fast, and there are more and more opportunities to leverage technology, and ultimately, with things like AI, right, and the ability, I think, over time, to drive more efficiencies in the business and self-service of our owners, it's a huge opportunity, I think, for us as we go forward, and that, you know, with our new CIO, is what we're really focused on. Now, are we going to see a No, I think we're on a pretty good cliff, and we're going to continue to do things that are really going to either drive efficiencies at the bottom line or top-line growth.
John E. Geller: <unk> I think for for US as we go forward in that with our new C. I O. As we're really focused on now are we going to see continued to increase investments no. I think we're on a pretty good clip and we're going to continue to to do things that are really going to either drive efficiencies at the bottom line or <unk>.
John E. Geller: Line growth that that's the focus going forward.
John E. Geller: That's the focus going forward. Thank you very much. Thank you, David. Thank you. Ladies and gentlemen, I'm not asking any other questions at this time.
Speaker Change: Got it thank you very much.
John E. Geller: David.
Speaker Change: Thank you, ladies and gentlemen, I'm showing no other questions at this time Mister <unk> I'll turn off my back to you for final comments.
John E. Geller: Mr. Geller, I'll turn the floor back to you for the final time. Thank you, everyone, for joining our call today. After last year's challenges, it was great to end the year on a strong note. Contract sales grew 4% year over year, excluding the impact of the Maui wildfires. International contract sales grew 36% year over year, with strong growth seen in both Europe and Asia Pacific.
John E. Geller: Thank you everyone for joining our call today.
John E. Geller: After last year's challenges it was great to end the year on a strong note contract sales grew 4% year over year, excluding the impact of the Maui wildfires International contract sales grew 36% year over year with strong growth seen in both Europe, and Asia Pacific and resort occupancy.
John E. Geller: And resort occupancy was nearly 90%, even with the Maui impact, illustrating our owners' and customers' demand to get on vacation. As we move into a new year, the transition to Abound is behind us, and we look forward to growing contract sales this year, driven by a mix of higher tours and improved VPG. We made significant changes in our Hyatt business that will enable us to more efficiently drive tours, grow contract sales, and better leverage our marketing and sales spending. Economic indicators remain positive, and our reservations on the books for the summer are up both domestically and internationally. We have realigned our organization to improve our long-term results, and we are looking forward to opening our first Waikiki Resort later this year.
John E. Geller: Nearly 90%, even with the Maui impact illustrating our owners and customers demand to get on vacation.
John E. Geller: As we move into a new year the transition to a bound is behind us and we look forward towards.
John E. Geller: <unk> growing contract sales this year, driven by a mix of higher tours and improve V. P. G.
John E. Geller: We made significant changes in our highest business that will enable us to more efficiently drive tours grow contract sales and better leverage our marketing and sales spending.
John E. Geller: Economic indicators remain positive and a reservation on the books for the summer are up both domestically and internationally.
John E. Geller: Have realigned our organization to improve our longterm results and we are looking forward to opening our first walkie key resort later this year on behalf of all of our associates owners members and customers around the world I want to thank you for your continued interest in the company and hope to see on vacation soon thank you.
John E. Geller: On behalf of all of our associates, owners, members, and customers around the world, I want to thank you for your continued interest in the company and hope to see you on vacation soon. Thank you. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
John E. Geller: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.